Farm Ireland

Sunday 20 January 2019

First major sale of milk powder from intervention

First unofficial results are showing that 29,678.98 tonnes of SMP in intervention sold at a price of €1051/t
First unofficial results are showing that 29,678.98 tonnes of SMP in intervention sold at a price of €1051/t

Ciaran Moran and Sarah Collins

It is understood that almost 30,000t of Skimmed Milk Powder was sold from the EU’s massive stockpile of the product at this latest auction.

According to sources in Brussels, first unofficial results are showing that 29,678.98 tonnes of SMP in intervention sold at a price of €1051/t.

It comes as global dairy prices jumped at a fortnightly auction held early on Wednesday, snapping four consecutive falls and pointing to ramped up global demand that could see further price rises.

The European Commission bought up around 20pc of SMP production in 2015 and 2016, at a time when raw milk prices slumped by around 50pc.

There is now around 377,000 tonnes in storage, the majority from French, Belgian and German producers.

Ireland comes in sixth place with over 37,000 tonnes in stock.

Agriculture commissioner Phil Hogan intends to put "significant volumes" back on the market while butter and raw milk prices are good. "We are determined but not desperate," Mr Hogan told dairy processors last week, calling on them to make "meaningful bids in line with market reality".

But producers are sounding the alarm, pressing for the stocks to be used for animal feed or donated to the poor so they don't compete with freshly produced powder.

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Mr Hogan insisted there is "no justification" for fears of a milk price collapse.

Mr Hogan also warned dairy processors and cooperatives to halt over-production before it is too late.

"Production is overwhelmingly expanding," he said. "A 4pc increase in milk deliveries is just not sustainable."

Lakeland Dairies chief executive Michael Hanley said the skim market is 5-6c/l under intervention price which is "very concerning". "The overhang in the market place is a major negative shadow on dairy markets so a correction in supply is needed as soon as possible."

He said there was over 370,000t in intervention but it was now limited in what it could be used for.

"We are paying more today for product than we are getting back from the marketplace and that has been the case since the turn of the year," he said.

Figures show EU SMP exports were up 12pc in Jan-Feb 2018, with significant increases to Algeria and Egypt.

What happened at the latest Global Dairy Trade

The Global Dairy Trade Price Index climbed 2.7 percent, with an average selling price of $3,587 per tonne, in the auction held in the early hours of Wednesday morning.

The index had fallen for the fourth time in a row at the previous sale, edging down 0.6 percent.

 "All up, this auction result hints at strong global demand. And with NZ production still relatively weak heading into winter, we expect prices, if anything, to creep a little higher over coming months," said ASB rural economist Nathan Penny, in a research note.

Prices had been slipping in recent weeks thanks to New Zealand, the world's largest dairy exporter, posting stronger-than-expected production as bad weather conditions eased up.

 Nevertheless, the Pacific nation was still struggling with below-average supply due to extreme weather fluctuations and analysts said buyers were starting to realise that and snap up any New Zealand products they could find.

A total of 19,262 tonnes was sold at the latest auction, an increase of 11.8 percent from the previous one, the auction platform said.

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